Property Law B Table Notes PDF

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received distinction, formula/scaffold to answer questions - full set of notes...

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Caveats

The main purpose of a caveat us to freeze the register but once lodged a caveat serves as ‘notice to all the world that the RP’s title is subject to the equitable interest alleged in the caveat.’ Re Hitchcock (1900) 17 WN (NSW) 62. GENERAL FORUMLA

1. Identify caveat - Caveats covered under s 74F of RPA and used to protect unregistered interests 2. Consider timing of caveat - needed to be lodges ASAP otherwise lodging caveat after another party’s settlement under s43 makes it earlier equitable interest v a later legal interest 3. Was there notice? Did any parties search the register? - if a party searched the register and found nothing then may be innocent, bona fide without notice and will likely receive first priority 4. Was there a failure to caveat? Did a failure to caveat constitute arming conduct? failure to caveat could postpone earlier interest 5. Determine if interest are legal or equitable - consider if section 43A would make an interest legal rather than equitable (consider effect) 6. Arming conduct 7. Apply priority rules with regard to ANY arming conduct, failures to caveat, legal interests by virtue of section 43A, notice of any caveat General Info - Caveats covered under s 74F of RPA and used to protect unregistered interests - Requirements for caveats; - Needs to be a proprietary interest - Cant lodge a caveat to protect a contractual or personal interest - Proprietary interest must exist at time of lodging caveat - e.g mortgagee or someone with a call option to purchase land can also lodge caveat - Cannot lodge claim if you merely have a cause of action - but can if there is a constructive trust and you have contributed to the purchase price or made improvements to the property (Ryan v Kalocasy) - Cant lodge to protect a mere equity (mere equity is a legal claim) - Contract is not a caveat bale interest - 2 tiered test; (Bedford Properties Pty Ltd v Surgo) - Caveator must have honestly believed that they have a caveatable interest (subjective test) and they had reasonable grounds for lodging the caveat (objective test) (Bedford Properties Pty Ltd v Surgo) - Person may be liable even though they were honest but their solicitor was neglectful in lodging the caveat (Bedford Properties Pty Ltd v Surgo) - Compensation for wrongful: s74P requires loss to be mitigated

Caveats continued PRIORITIES DISPUTE

Registered v unregistered interest - Registered interest priority determined by date of registration - Unregistered interest generally regarded as equitable interest - Not all unregistered interest treated as equitable (may be regarded as legal) if falls under s43 - In this case they enjoy the advantages that legal interests enjoy over competing equitable interests. - Therefore in a competition between unregistered interests, not all interests are to be regarded automatically as equitable (rather as they would have been regarded under old system). - The RPA itself recognises that some unregistered interests may be legal since it allows a caveat to be lodged to protect a ‘legal and equitable interest.’ (s74F(1) RPA). - Examples of a legal interest: unregistered oral lease complying with s23D(2) of Conveyancing Act Role of Caveats in Priorities - Caveat wont affect priorities dispute - caveat doesn’t change the interest itself therefore of itself it doest necessarily grant priority and doesn’t stop future subsequent dealings with registered (only freezes)

- Caveats more relevant where there is a failure to caveat because it can equate to postponing contract - Caveat is a warning - alerts world that there are interest over this land any subsequent dealings gives the person time to lodge their interest? Before anyone else - freezes register - acts as an interlocutory injunction that freezes the register so that an further dealings cannot be registered and gives time for the caveator to take legal action to protect their interest - Caveat must be registered before the second interest created General Priority Rules

- Registered v Registered – according to date of registration (first in time only where equities are equal). - Determining the better equity; - Unregistered interests generally equitable. - Priority determined by equitable principles in old system land. - If one or more is regarded as legal they will prevail over equitable. - First in time may have better right but only where equities are equal. - But in determining where better equity lies court can consider all factors. - If for example the holder of an equitable interest has lulled the holder of a later equitable interest into thinking that the earlier interest did not exist or the holder of the later interest can demonstrate that the first in time interest should be postponed in favour of the later interest. - Arming conduct - equitable interest not longer equal = equities postponed - lulling equitable interest holder

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to believe that an earlier interest does not exist Registered v Unregistered – registration defeats competing unregistered interests. Unregistered generally equitable (with few exceptions). Legal v Equitable = Legal. Equitable v Equitable = First in time where equities equal (Rice v Rice)

Caveats continued FAILURE TO CAVEAT

- Sometimes to failure to lodge caveat will be postponing conduct but this will re-

quire the other equitable interest holder to have searched the CoT and found nothing Thereby, first equitable holder lulled them into believing there was no other equitable interest Lack of notice important Need to lodge caveat before the second interest is created Doesn’t necessarily have to be arming conduct for a failure to caveat to be postponing conduct

- If caveat made after second interest created, caveat has no effect - timing crucial: must lodge caveat before any other interest are created (Butler v Fairclough) - Failure to caveat can create a better equity (rice v rice) and can be postponing - need to show that subsequent interest holder searched register and didn’t find any caveat - Failure to caveat lulls people into thinking that there is no other register (arming conduct) TIMING IS CRUCIAL

- Timing is crucial - cutler v fairclough - simply lodging a caveat will not automatically result in priority for the caveated interest - too late to lodge a caveat after someone else has registered - IAC finance case - Lodging caveat after another party’s settlement under s43 makes it earlier equitable interest v a later legal interest - If someone lodges a caveat after settlement (another party) then this is unfair to the party who has now settled without knowledge of the prior interest and subsequent caveat - therefore s43A deems the interest that is caveated after settlement as equitable and the purchasers interest is deemed legal - means the purchasers later legal interest would win in a priorities dispute despite the freezing of the register due to the caveat by the earlier equitable interest holder (freezing the register would generally mean the purchaser cannot register their interest and would not satisfy the system of title by registration but in this case it will differ because the later legal interest will win in a priorities dispute against the caveated interest) - When an unregistered interest is created you should lodge a caveat ASAP (caveat affects priority dispute) - In dispute between your earlier equitable in-

terest and a later equitable interest, rule in rice v rice because failure to caveat is postponing conduct - if settlement occurs, you can lodge a caveat after settlement but before registration which froze register and then allows priority dispute to be solved, priorities dispute resolved by court and will favour second equitable interest because failed to caveat before that second settlement occurred - s 43 has legal effect - Lodging caveat stops the interest of the person who just settled from becoming a legal interest (cant register because it freezes register) and allows time for priorities dispute, however, this may not be helpful because failure to lodge caveat prior to settlement of another party may be considered postponing conduct in a priorities dispute and also section 43 may make the equitable interest a legal interest regardless (can also apply s 43)

Caveats continued

NOTICE IS CRUCIAL

- As a general rule and irrespective of the conduct of the holder of the earlier interest, a later unregistered interest cannot prevail over an earlier where (at the time of acquiring the later interest) the holder of the later interest had notice of the earlier: Commonwealth Bank of Australia v Platzer [1997] 1 Qd R 266. - NOTICE of the earlier interest AFFECTS THE HOLDER’S CONSCIENCE. - Constructive notice may be sufficient – see Perpetual Trustees Co Ltd v Smith (2010) 186 FCR 566 where mortgagee was bound by leases because had constructive notice but not by equitable vendor’s lien because no caveat was lodged and so no notice was given. - Moffett v Dillon [1990] 2 VR 480 Facts: - Moffett entered into a contract for sale of his land to D. Contract was later rescinded but it was agreed that moneys owing under contract be secured by charge over Dillon’s property. - Moffett lodged caveat. - Dillon then gave mortgage to Westpac. Bank took mortgage with notice of Moffet’s earlier charge. - Bank lodged mortgage for registration and by mistake it was registered but court was operating as though dispute was between unregistered interests. - Court held Moffett should prevail. First in time, and here Westpac had notice so better equity for Moffett. - Holder of later equitable interest who has notice of an earlier interest takes subject to it. ARMING CONDUCT

- Misrepresentation or hiding interests - Conduct which assists or allows one party to deal with an interest in a way such that it appears unencumbered or free from adverse equity - E.g giving another party the means to deal with the estate as though that party were the legal or equitable owner: Abigail v Lapin (1934); giving a receipt but not collecting the purchase money: Lloyd’s bank Ltd v Bullock [1896]; failing to obtain the title deeds: Walker v Linom [1907]. - Arming conduct will lead to postponement in priorities dispute - Rice v Rice: concerns arming conduct - Authority on the priority rules in relation to 2 equitable interest - authority for the rule that first in time except for when the equities are not equal - Equities in this case are not equal due to arming conduct - Facts: Vendor without receiving purchase price gave receipt and title deeds to purchaser. - He had equitable interest (vendors lien) and competition between a mortgage that was created by purchaser (later equitable interest) which was postponed because of conduct of arming the purchaser. - Held: “the vendor voluntarily armed the purchaser with the means of dealing with the estate as the absolute legal and equitable owner, free from every shadow of encumbrance or adverse equity”.

- Was the vendor legally entitled to retain the possession of property until the payment? Vendor now has an equitable interest

ARMING CONDUCT CONTINUED NEXT PAGE

Caveats continued ARMING CONDUCT

- Abigail v Lapin (1934) - Abigail v Lapin (1934): the Lapins executed a transfer to Heavener. Transfer was only ever meant to be as security for a loan and therefore redeemable on repayment of the loan. Instead H treated the transfer as though she was the genuinely the titleholder and mortgaged the land to Abigail, who was not aware of the Lapin’s interest and they had not lodged a caveat. The mortgage between H and A was not registered. Priority dispute between two competing unregistered interests (between Abigail and the Lapins). Abigail prevails because the Lapins had armed H with the indicia of title but had also failed to lodge a caveat to protect their interest. Not a suggestion by the court that is it compulsory to lodge a caveat but lodging one would have had the effect of alerting Abigail to the Lapin’s interest, - Failure to lodge a caveat is what allows H to create a mortgage and misrepresent the situation. Hence amounts to postponing conduct. - Hence failure to lodge a caveat is an important consideration but not the only one – i.e. it can be important that the other party has failed to search the register. - This was not a case decided about a failure to caveat but because of ARMING conduct.

- Heid v Reliance Finance

- RP (V) agrees to sell land to P. Without receiving purchase price, V hands P the -

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CT and signed transfer acknowledging receipt of purchase price. This enables P to represent herself as absolute owner and armed with these documents P creates equitable interests in favour of third parties who have no notice of V’s right to be paid. V will not be able to assert better interest against them. V allowed P to act as he did and in all fairness and justice that earlier interest should be postponed. The postponement is not because of a failure to caveat (although that would have preserved the interest) but because of the arming conduct in handing transfer and CT to P. One constant principle: Mere failure to caveat does not postpone interest. Failure to caveat only leads to postponement where failure considered in light of all the circumstances allows another person to acquire a later unregistered interest in the land on the mistake assumption that the earlier did not exist. So by failing to lodge a caveat the earlier interest has contributed to the assumption upon which the later interest holder acted upon. No duty to caveat but in circumstances involving priority disputes, the failure to caveat may cause a party to fail in a priority competition. The equitable priority rule qui prior est tempore potior est jure (first in time) was held in Rice v Rice as a rule of last resort and to be applied only if the equities between the parties in competition were equal. The lodgement of a caveat will have an impact on the equities in a priority dispute. The failure to lodge a caveat to protect an unregistered interest may be a factor warranting the postponement of an equitable interest to a later interest ac-

quired by a person in the mistaken belief that the RP had an unencumbered title. - Like arming conduct (conduct which assists or allows one party to deal with an interest in a way such that it appears unencumbered or free from adverse equity) such as giving another party the means to deal with the estate as though that party were the legal or equitable owner: Abigail v Lapin (1934); giving a receipt but not collecting the purchase money: Lloyd’s bank Ltd v Bullock [1896]; failing to obtain the title deeds: Walker v Linom [1907].

ARMING CONDUCT CONTINUED NEXT PAGE

Caveats continued ARMING CONDUCT

- Barry v Heider

- Barry v Heider (1914) 19 CLR 197 – Mr Barry was the RP of a fee simple in Tor-

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rens land. Barry was defrauded by Schmidt who tricked him into signing a transfer form saying that he would sell the property for much less than it was worth. Schmidt then used the transfer form/CT to raise a couple of loans with Mrs Heider, using the property as security as well as Gale. Nothing had been registered. So, the transfer form has not been registered and neither have the mortgages – so you have a group of unregistered interests. Barry tried to argue that as all the mortgagees had were unregistered mortgage instruments, those instruments could not create any interests in the land itself. So he’s saying that they have contractual rights against Schmidt but that they cannot have any proprietary equitable rights in the land because s 42 says you can’t have such rights without registration. Decision of Griffiths CJ – Griffiths reviews the provisions of the legislation; notes that parts of the legislation clearly envisage the operation of unregistered interests: Part 9 of the Act deals with trusts; the caveat provisions; and provisions allowing suits of specific performance. Griffiths CJ concludes that Torrens legislation does recognise unregistered interests in land. Isaacs J finds that s 41 denies effect to an instrument until registration, it does not deny effect to the rights arising out of the transaction that gave rise to the dealing. No legal interest can be created because no legal interest can arise in land without registration but if equity would enforce the agreement then an equitable interest can arise before registration. Schmidt is RP but obtained registration by virtue of fraud and hasn’t paid Barry purchase money. So Barry has right to get property back or vendor’s lien. Schmidt mortgage property to Heider. Heider has no notice of fraud. Barry lodges caveat. Schmidt mortgages property to Gale. Caveat withdrawn by Barry’s solicitor but after Gale becomes aware of caveat. Gale still grants loan. So order is Heider, Barry, Gale.

- Instrument doesn’t have effect but the rights under that instrument are

still protected - By virtue of s43A - Heider priority prevails - no exception to indefeasibility of title because she wasn’t aware

SECTION 43A NEXT PAGE

Caveats continued

SECTION 43A

- S 43A makes an unregistered interest that is awaiting registration because every-

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thing is completed a legal interest so that in a priorities dispute between an earlier equitable interests this later legal interest will take priority (bona fide without notice of other interest) S 43A only protects if you are bona fide without notice - if notice given after settlement s43 will give protection Failure to caveat comes into play because the bona fide purchaser needs to check for any caveats - if they did, then they will be protected under 43A 43A makes what would be a later equitable interest a later legal interest - it would have been an equitable interest because a caveat blocked the register thus preventing it from being registered BUT s 43A recognises that when an earlier interest holder lodges a caveat after another party settles property this is unfair and the purchaser who bought bona fide without notice of that earlier equitable interest and now cannot register their interest due to the freeze from the caveat will deem that purchasers interest as a legal interest, allowing that later legal interest to win in a priorities dispute against the earlier equitable interest (will be a legal estate under Torrens System despite lack of registration due to freezing caveat) - upon settlement need to do a final check for a caveat otherwise will not apply because the caveated may have made a caveat in between the time you purchased and settled Section 43A puts a person who has take a “dealing registrable” in the same position as one who has take a legal estate. - dealing must be accompanied by a certificate of title Only relevant in the period between completion and registration and only in relation to notice of prior interests. Courtenay v Austin (1961) 78 WN (NSW) 1082 ... “the section affords protection against unregistered interests of which no notice was acquired before settlement but of which notice was or might be received after settlement but before registration of the particular dealing.” - PUT THIS QUOTE IN EXAM - protection in relation to notice For protection of s43A MUST HAVE: - A dealing registrable – means taken directly from RP (but note rule of Wilkes v Spooner) So if V sells to P and P on sells to N in the time after settlement but between registration, P is protected by 43A and N is not. N may be protected by common law – Wilkes v Spooner [1911] 2 KB 473. - successive purchasers not protected by s43A (statute), but are protected at common law possibly - Must not be defective. - Must be accompanied by Certificate of Title. - Must be executed by person who is current RP. - Not available to volunteer ( J &H Just Holdings v Bank of NSW) Deemed to be a legal interest under s43A Successive effects doctrine - Doctrine of claiming from under a bona fide purchaser for valu...